What Does This Mean for Global Markets?
The second phase of the "deal" may be about to begin...
On Monday, financial markets welcomed the nomination of Beasant as the U.S. Treasury Secretary, with global currency markets rising as people hope that this hedge fund manager can mitigate the impact of some more extreme economic views.
The U.S. dollar index fell below 107 on Monday; the euro performed best against the dollar, rebounding above 1.05. The yen, pound, and Australian dollar also rose against the U.S. currency.
These moves are a response from global investors to the announcement last Friday evening of the intention to nominate Beasant for one of the most influential positions in the U.S. government. The Treasury Department is responsible for the broad supervision of tax policy, public debt, and international finance.
Strategists consider Beasant a "safe choice," a well-known market participant, and a more moderate option compared to some of his competitors.
Beasant, 62, is expected to push for more moderate tariff policies, reduce regulation to promote growth, and target deficit spending reduction.
Susannah Streeter, head of funds and markets at Hargreaves Lansdown, said in a research report, "The choice of Treasury Secretary has further inflated investor sentiment, and Wall Street seems to be on the verge of a new round of gains."
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She added, "Beasant's long-term market experience has strengthened confidence in the pro-business policies to come and raised hopes that any tariffs will be highly targeted and that core inflation will be lower."
Phased implementation of tariffs
At the beginning of this month, concerns about rising prices intensified, prompting strategists to rethink the outlook for global bond yields and currencies.
It is widely believed that commitments to tax cuts and significant increases in tariffs could boost U.S. economic growth but also expand the fiscal deficit and exacerbate inflation.
To increase revenue, a comprehensive tariff of 20% on all goods imported into the United States has been proposed, with tariffs on cars produced in Mexico reaching as high as 2000%.
While many economists are skeptical about the effectiveness of tariffs, Beasant defended them, saying they are "a useful tool for achieving foreign policy objectives." However, he also called for a "phased" implementation of tariffs.
Analysts at Rabobank said in a research report, "The news that Beasant is the preferred choice for the incoming U.S. Treasury Secretary increases the possibility that the 'deal' may be watered down."
They added, "Beasant is a successful macro hedge fund manager who tends to reduce the U.S. budget deficit to 3% of GDP, which clearly indicates his smaller appetite for deficit spending."
Beasant, who once worked for billionaire philanthropist and investor Soros, has advocated for the so-called "3-3-3" target, which aims to reduce the U.S. deficit to 3% by 2028, achieve 3% economic growth, and add 3 million barrels of oil production per day.
Business as usual?
Some strategists expect the Treasury Secretary nominee to be seen as good news for Asian currencies in the coming months.
Scott Spratt, a strategist at Societe Generale Corporate and Investment Banking, said in a research report, "The market considers Beasant a 'safe choice.'"
He added, "We suspect that he believes tariffs should be implemented 'in phases,' and the initial levels being discussed are 'maximalist' positions, which should also boost Asian currencies."
Tesla CEO Musk believes that nominating Beasant as Treasury Secretary would be a disappointing move. Musk described Beasant as a "business as usual choice" in a social media post on November 16th via X, adding that "business as usual is dragging the U.S. down."
Beasant is also an advocate for the cryptocurrency industry, which means he could soon become the first Treasury Secretary to publicly support crypto assets. He has previously pledged to make the U.S. the "crypto capital of the world."